Why do you invest? You invest because you want money, a better future, a bigger home, you want to go on nicer vacations, you want more.
To be able to afford everything you invest for, you need to become a successful investor.
Becoming a successful investor is not for everyone. To become successful you have to make a commitment, be disciplined and follow some steps. Here are the steps others have followed:
8 Steps To Becoming A Successful Investor:
Step # 1 – Determine what kind of investor you are:
- Are you a buy and hold investor?
- Do you like buying and selling?
- Do you like conservative or aggressive investments?
- Do you like being in the market or prefer CD’s sold at banks?
Step #2 – Determine your Financial Priorities:
- Do you want more money or more things?
- Why are you saving?
- Are you saving for today or tomorrow?
- What’s important to you?
Step #3 – Determine your Financial Goals?
- Do you want to buy a larger home?
- Do you want to pay for your child’s college education?
- Do you want to retire early?
Step #4 – Develop a Financial Plan:
- To be a successful investor, you need a long-term financial plan.
- Work with a financial planner to develop a financial plan.
- A financial plan is the road map that steers you towards reaching your financial priorities.
- A financial plan puts your financial priorities and goals in writing.
Step #5 – Determine your Investment Strategy:
- Your investment strategy gets you to your financial goals.
- Your strategy is determined by your goals.
- Is your strategy to save more or invest more?
- You can invest more by maxing out your 401k retirement plan at work.
- You will invest more if your employer matches your 401k retirement contributions.
- You can invest more by not spending as much.
- You can save more by following a budget.
- You can save more by not buying something unless you need it – not want it – but need it.
- Only buy something when it’s on sale.
Step #6 – Follow a Budget:
- A budget helps you stay on target and will keep you focused.
- A budget gives you parameters to work within.
- A budget helps you meet your financial priorities.
- You must be disciplined to stay within your budget.
Step #7 – Determine your Investment Profile:
- Your investment profile reflects your investment style.
- Your investment profile shows your investment likes and dislikes.
- Maybe you like stocks but not bonds.
- Maybe you like mutual funds but not stocks.
- What risk level are you willing to tolerate with your investments?
- Make sure your level of risk matches your investments.
- If your investments are not within your risk tolerance level, reallocate so that they are.
- Your risk levels change, as your life changes.
- When you are single, your tolerance for risk may be higher than when you start a family.
- When you get closer to retirement age, your tolerance for risk may be lower, you want to preserve your money vs risk losing it.
- Working with a financial planner may help you determine your investment profile.
Step # 8 – Determine your Financial Profile:
- What are your insurance needs?
- Are you properly insured?
- Do you have enough life insurance?
- Is it the type of life insurance that you meets your financial needs?
- There are term life insurance policies & cash value life insurance policies.
- Each type of life insurance policy satisfies different financial needs.
- A term life insurance policy has no cash value.
- A cash value life policy builds up a savings account for you.
- Do you have disability insurance?
- Do you need disability insurance?
- Do you need long-term care coverage?
- If any gaps exist in your insurance coverages, work with your financial planner to fill in those gaps
Implementation is critical. Review is essential. Remember it’s not what you make but what you keep that really matters.
Becoming a successful investor takes time; be patient with yourself. It also takes mistakes. Mistakes are okay, as long as you learn from your mistakes and move on. Work with a financial planner to get you started.